RBA Stuns the Markets Again with a Hold at 4.10%

Highlights

• It was a quiet morning on the Asian economic calendar, with no economic indicators from Australia, China, or Japan to draw interest.
• While there were no economic indicators to consider, the RBA was in action this morning.
• The RBA surprised the markets for a second consecutive month, holding interest rates unchanged at 4.10%.

It is a quiet morning on the Asian economic calendar. There were no economic indicators to draw interest following disappointing manufacturing PMI numbers from Monday.

While there were no economic indicators to influence, the RBA delivered its July monetary policy decision. The RBA surprised the markets for a second consecutive month.

After a surprise 25-basis point interest rate hike in June, the RBA held interest rates unchanged at 4.10% this morning. Economists forecast a 25-basis point interest rate hike to 4.35%.

According to the RBA Rate Statement,

• The Board left the cash rate unchanged on economic uncertainty and allowed time to assess the impact of interest rate hikes and the economic outlook.
• While inflation remains elevated, inflation passed its peak and softened further in May.
• Economic growth slowed, and labor market conditions have eased, though the labor market remains very tight.
• The Board will continue to monitor the evolution of labor costs and firms’ price-setting trends.
• While uncertainty remains over the outlook for household consumption, the Board expects the economy to grow as inflation returns to target. However, the path to this balance is a narrow one.
• Further monetary policy tightening may be needed to ensure that inflation returns to target in a reasonable timeframe.
• In addition to assessing the impact of recent interest rate hikes on the economy, the Board will also consider the global economy, trends in household spending, and the forecasts for inflation and the labor market.

AUD/USD Reaction to the RBA Interest Rate Decision and Rate Statement

Before the RBA interest rate decision and rate statement, the AUD/USD fell to a pre-RBA low of $0.66682 before rising to a high of $0.66874.

However, in response to the RBA decision and Rate Statement, the Aussie tumbled from $0.66808 to a session low of $0.66438.

This morning, the AUD/USD was down 0.29% to $0.66529.

Next Up

It is a quiet day ahead on the European economic calendar. However, German trade data will draw interest later this morning. An unexpected narrowing of the trade surplus would fuel recessionary fears following the disappointing manufacturing PMI numbers.

However, there are no US economic indicators to consider, with the US markets closed for the Fourth of July holiday.